ACROFX
Short

Never catch a falling knife, USDNOK ready for a top?

FX:USDNOK   U.S. Dollar/Norwegian Krone
You might wonder why we are looking for a possible top in USDNOK             , as the underlying trying for 2014 is with no doubt up.

Based on the underlying economy in Norway and the forecast for Norges bank, the index weighted Krone should be a lot stronger than current levels. But stronger macro from US and falling oil             price has reduced the demand for NOK             , especially against US dollar             (USD). However, we feel that current risk/reward is tilted on the downside based on following factors.

Upcoming week, we following events from Norway.
- Budget statement (Wed), should be more oil             spending as this sectors drags down the overall activity in Norway. A higher spending means more buying of Norwegian Krone for Norges Bank.
- Core inflation ( Fri             ), should surprise on the upside and above Norges Banks forecast of 2.5% as weaker NOK             should support a higher inflation (imported) a long with higher food prices and airfares.

From a technical point of view:

Weekly chart:
- 61.8% retracement from 2009 highs around 6.50+
- Overshoot from current trendchannel on the upside. In most cases we see a powerful reverse after such events
- RSI (weekly) is above 70. Last two times this happend, we did set a meaningfull top

Resistance: 6.60 and 6.80
Support: 6.25/6.20 and 5.95/6.00

Again, we have last two weeks been wrong regarding a possible top in USDNOK             and we are trying to catch a falling knife. However, we feel risk/reward is on our side based on fundamental factors. But the market is for now telling us that the trend is clearly up.

Safe trading!
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